Advantages of Using a Traditional IRA

1. Contributions to a traditional IRA are fuly deductible provided that the taxpayer has not exceeded certain income limitations and no employer sponsored retirement plan is available.

2. All gains on amounts in the plan are tax deferred until the money is withdrawn.

3. Contributions can be made after the tax year ends. The deadline to contribute is April 15th of the next year.

4. A stay-at-home spouse can make contributions even if he or she has no earned income.

5. The Retirement Saver's Credit encourages retirement savings by allowing a credit based upon a percentage of amounts contributed. this credit can be for an amount as high as $1,000.

6. Up to $10,000 can be used for a first-time homebuyer without paying the early withdrawal penalty.

7. Up to $10,000 can be used for certain education and other expenses without paying the early withdrawal penalty.

Disadvantages of Using a Traditional IRA

1. All distributions are taxed at ordinary income rates - applicable at the time funds are distributed.

2. An owner of an IRA account is required to take a minimum distribution when he/she reach age 70 1/2. If the required distribution is not taken, a 50% excise tax may be imposed on the shortfall.

3. There is a 10% early distribution penalty. The maximum amount the taxpayer can contribute in 2004 is $3,000 ($3,500 if the taxpayer is over 50).

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